Zara is one of the world’s largest and well renowned fast-fashion company. Founded by Amancio Ortega Gaona; Zara started its first retail store in 1975 in La Coruña, Spain. Ortega has started in 1963 with clothing factories and quickly realized that retailing has to be linked to the manufacturing to understand the customer requirements in the apparel industry. Since 1975, Zara has recorded rapid growth rate under one business idea: “Linking customer demand – manufacturing – distribution”. In 1985 Inditex was formed which became the holding company of Zara fashion. By 2003 Inditex is the holding group of Zara, Massimo Dutti, Bershka, Pull & Bear, Stradivarius and Oysho brands. Operating successfully for over 38 years, Zara now has 1,830 stores in 82 countries. Zara generates more than 70% of the group sales as they are committed in being a fast–fashion brand than a high–fashion brand. Zara is specialized in women fashion and launches approximately 11,000 new products every year compared to 2000 – 4000 of its competitors. The current revenue of Zara is approximately US $7 billion. In 1985, Jose Maria Castellano Rios who was earlier an IT manager joined the company. Castellano and Ortega shared a common belief that computers are critically important and could enable their idea of developing an effective business model. In 1997, Castellano became the CEO of Inditex. Integrating production, marketing and sales with the use of computers has enabled Zara to keep up with the ever changing customer demands in the fashion industry. Their flat organizational structure has enabled the store managers to choose what they want to sell based on the local customer demands. A group of people called “commercials” has discretionary powers in deciding what clothes should be designed and produced. Store-to-store transfer of garments created a global balance in fast and slow moving garments at Zara’s stores. The current information systems at Zara match their business model. Xan Salgado Badas is the informational technology head at Inditex. He believed in handling the IT needs of the company within the organization rather than outsourcing due to unique demands. The Information Systems department provide support for Store operations, Logistics and overall administration. At the store level, information technology drives the Personal Digital Assistant (PDA) and the Point of Sale (POS) system. The system operates on Microsoft Disk Operating System (MS-DOS), which is an agile technology. These systems are used to keep a track of the existing stock and place new orders for stock twice a week. The POS transmits the daily sales records to the headquarters at La Coruña. At the factory level information systems is used to keep a track of the production requirements, designing and other administrative operations. Distribution centers used IT in order dispatching through the conveyor belt, recording the stock inflow and outflow. Store Managers use a hand held computer which is linked to the information systems at La Coruña to know about new designs. The current POS technology which is outdated is still running effectively and is easy to access and maintain at both ends (Store manager & Administration). Microsoft has stopped supporting MS-DOS (operating system running the current POS) and the technology is a free source which is prone to several risk. Salgado the IT head of the group is worried about the information systems that are currently in place as the company is falling behind its current competitors in utilizing modern technology.
Q2: How would you advise Salgado to proceed on the issue of upgrading Zara’s POS systems? Zara being such a huge retailer in global fashion industry spends only 0.5% on its total revenue towards Information Technology. The company does not have a CIO in place to regulate the IT needs and budget. The POS technology that is currently in place is agile but runs perfectly to meet the needs of the...
References: Laudon, K., C., & Laudon J., P. (2010). Management Information Systems: Managing the Digital Firm, 130-132.
McAfee, A., Dessain, V. & Sjoman, A. (2007). Zara: IT for Fast Fashion. Retrieved from http://hbsp.harvard.edu
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